The Mortgage Bond Market influence Mortgage Rates. Mortgage Rates don’t follow The Prime Rate they follow the Bond Market. This is difficult for many borrowers to follow, probably because the media about the Prime Rate makes so much hype.
So what influences the Bond Markets? Short answer is the Stock Market. When money flows out of the stock market, it some of it gets invested (parked) in the bond markets. Mortgage financing is influenced by these stock market changes. More money available in the bond markets can lead to lower interest rates, conversely when less money is available the rates rise.
Just since the 1st of this year the stock market has had several days of market changes of greater than 1% and this volatility effects the available money in the bond markets, IE: Rate Movement. I think this has been the most movement in decades.
This is just one of many factors that effect mortgage rates but it’s a big one.
Other influences in the Mortgage Market have been the constantly changing underwriting guidelines. These revisions are constant and are a result of the defaults that have occurred since early in 2005.
This volatility is expected to continue so when you see a rate that you can live with, Lock The Rate, it probably won’t last very long.
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